Dispute Boards: A Novel Dispute-Resolution Technique for Life Sciences Companies Fighting COVID-19

June 02, 2020

In these unprecedented times, life sciences companies are partnering up — sometimes in a matter of days — to find potential vaccines or treatments to the COVID-19 virus. In an effort to help the world beat the pandemic that the COVID-19 virus has brought upon us, these companies are counting on one thing: that they can develop a vaccine or treatment as quickly as they came together to partner in the effort.

With the common goal of fighting a global crisis, there is no reason to think that the collaboration between such companies should not be smooth. However, if disputes arise between them, the current context requires that those disputes be resolved to allow the companies’ work to continue as quickly as possible so as to avoid any break in their collaboration. Indeed, lives depend on it.

One of the most common ways for disputes to be resolved in the life sciences sector is through arbitration. For international collaborations, arbitration is particularly well-suited to life sciences disputes, among other reasons, for its confidentiality, the possibility of having arbitrators with subject matter or technical expertise, its procedural flexibility, and the ease with which arbitral awards can be enforced around the world. However, even with all of these advantages, the time frame within which arbitrations are resolved — even if shorter than most court proceedings — may still be too long for companies fighting COVID-19.

As we discussed recently, dispute boards, a dispute resolution mechanism historically found in construction contracts, can allow life sciences companies fighting COVID-19 to resolve disputes arising under their agreements in short order.

How Can Dispute Boards Help Life Sciences Companies Keep Moving Forward in the Fight against COVID-19?

Dispute boards are generally categorized as either dispute review boards, or "DRBs", which issue recommendations that the parties are not contractually bound to follow; or dispute adjudication boards, or "DABs", which issue decisions or determinations that the parties may be contractually bound to implement. Their relatively short and flexible procedures mean that they can be used effectively to resolve pressing issues that could otherwise be a sticking point in the parties’ relationship.

The following features of dispute boards make the very quick resolution of such pressing issues possible:

  • Dispute board procedures settle disputes in a specified period, and can take as little as a few months — or less, if the parties agree. Short procedures allow the parties to "move on" as soon as possible, and help focus the parties’ efforts on the key issues.
    Dispute boards have relatively flexible procedures and evidentiary rules. This facilitates the resolution of matters that are evolving in real time.
  • Dispute board hearings are informal. The parties address the dispute board directly, and the role of counsel at hearings is generally limited to legal issues. Keeping client representatives front and center can assist in protecting the parties’ relationship and it also helps foster creative solutions.
  • If they choose to resort to a dispute adjudication board (as opposed to a dispute review board), the parties will obtain a response to their dispute that is contractually binding (though not directly enforceable in the same way as a court judgment or arbitral award). A clear result like this can help the parties move forward, and can help avoid the risk of getting drawn-out in negotiation, conciliation or mediation.
  • A "standing dispute board" can be established to resolve disputes that arise during the lifetime of a certain relationship or project. Having the same person, or people, hearing each dispute related to a given relationship or project can be valuable. This may be especially important in the context of disputes stemming from the effects of COVID-19, which may cause a series of associated issues as the crisis develops.

In short, dispute boards are an efficient means of addressing discrete and pressing issues, especially where it is important that the parties preserve their relationship and otherwise continue cooperating.

How to Provide for a Dispute Board if Your Contract Does not Already do so?

Dispute boards are a creature of contract. Therefore, if the parties’ contract does not already provide for a dispute board, an amendment to the contract’s dispute resolution clause will be required.

This will normally need the consent of all parties to the contract. That said, we anticipate that in the present uncertain times, counterparties may be open to discussing new means of efficiently managing issues arising in their relationship.

How Can Dechert Assist?

Amending dispute resolution clauses: Dechert’s blend of deep transactional and contentious experience means that it is well placed to assist with adjusting dispute resolution clauses, to better suit the present conditions (including by providing for a dispute board).

Resolving disputes themselves: Dechert’s dispute resolution teams are experienced in a wide range of complex international disputes. They assist clients at all stages in the life of disputes from initial inter-party discussions to post-judgment enforcement, including by representing parties before dispute boards, and in arbitral proceedings following dispute board proceedings.